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Econ Book Readings

by: Nazifa Islam

Econ Book Readings ECON 2110

Marketplace > Clemson University > Economics > ECON 2110 > Econ Book Readings
Nazifa Islam
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Book notes from August 22nd - August 31st
Principles of Economics: Microeconomics
Andy Hanssen
Class Notes




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This 3 page Class Notes was uploaded by Nazifa Islam on Monday August 22, 2016. The Class Notes belongs to ECON 2110 at Clemson University taught by Andy Hanssen in Fall 2016. Since its upload, it has received 172 views. For similar materials see Principles of Economics: Microeconomics in Economics at Clemson University.

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Date Created: 08/22/16
Econ 2110 August 22  Reading CT – Chapter One THE BIG IDEA  1. Big Idea One: Incentives Matter a. (Rewards and penalties that motivate behavior) b. Fame, power, reputation, sex, love 2. Big Idea Two: Good institutions align self interest with the social interest  a. Sometimes, “greed is good: b. Market incentives can sometimes be too strong  i. Overfishing 3. Big Idea Three: Tradeoffs Are Everywhere  a. It’s possible that something could be too safe  b. Tradeoffs are closely related to opportunity cost  c. Opportunity Cost: The values of the opportunities lost  4. Big Idea Four: Thinking on the Margin a. Constantly weighing the benefits and costs before making a decision  b. Marginal Cost: The additional cost from producing a little bit more c. Marginal Revenue: The additional revenue from producing a little bit more  d. Marginal Tax Rate: The tax rate on an additional dollar of income 5. Big Idea Five: The Power of Trade a. The real power of trade is the power to increase production through specialization b. Self­sufficiency is death  c. Specialization increases productivity  6. Big Idea Six: The importance of wealth and economic growth  a. Wealth is the ability to prevent and that comes from economic growth  i. Example: malaria  7. Big Idea Seven: Institutions Matter  a. It’s important to have property rights, political stability, honest government,  dependable legal system, and competitive and open markets  8. Big Idea Eight: Economic booms and busts cannot be avoided but can be moderated  a. No economy grows at a constant pace  9. Big Idea nine: Prices rise when the government prints too much money  a. Inflation: One of the biggest issues in Macroeconomics  i. An increase in the general level of prices  ii. Makes people feel poorer  iii. Makes it hard to understand the real value of goods  iv. Comes about when there is a sustained increase in the supply of money  v. Federal Reserve regulates all of this  10. Big Idea Ten: Central Banking is a Hard Job  a. Hard to balance between inflation and recession  The Biggest Idea of All: Economics is fun. It teaches us how to make the world a better place.  August 24  Reading MBN – Chapter One & Chapter Three  CHAPTER ONE  FDA got its power in 1906 o Stopped using rum­laden concoctions, cocaine­based potions  1963 amendments removed the time constraints on the FDA o Before, they had 180 days to make a decision  o Drastically increased the costs of introducing a new drug  o $800 million or more for each new drug  o Resulted in a drug lag   Type 1 Error: Not safe, not effective  Type 2 Error: Should be introduced, but isn’t released o Cost: Pain, suffering, and death  1. There is no free lunch, every choice entails a cost  a. In a world of scarcity, we can’t have more of everything, so we have to give up  some things  2. The cost of an action is the alternative that is sacrificed  a. Costs don’t have to be monetary  3. The relevant costs and benefits are the marginal (incremental) ones  a. Look at marginal benefits and the marginal costs  4. People respond to incentives  5. Things aren’t always as they seem 6. Policies always have unintended consequences and as a result, their net benefits are  almost always less than anticipated  CHAPTER THREE  Law of demand  Due to major developments in food processing technology, the time cost in preparing  meals has fallen dramatically   This has reduced the full cost (money plus time cost) of food, leading to the consumption  of significantly more calories   The problem really isn’t what people are eating or where, but the fact that people are  eating more meals  o More than the traditional three   Opportunity cost for women cooking is high  o Settle for tv dinners o Women can be working instead  August 29  Reading  MBN­ Chapter Four   Commercial airlines are much safer than driving  Scarcity: To get more of any good, we must sacrifice some of the other goods   We must be willing to accept some risk  Information is a scarce good: costly to obtain  August 31  Reading CT­ Chapter Two  The Power of Trade & Comparative Advantage   Specialization increases productivity, it’s impossible to have trade without it   Makes sense to divide knowledge across any brains …then trade   Absolute advantage: If the same good can be produced using fewer inputs than  another country   Production Possibilities Frontier (PPF): Shows all combinations of goods that a  country can produce given its productivity and supply of inputs   A country has a comparative advantage in producing goods for which it has the  lowest opp. cost   The theory of comparative advantage states that a country should make more of  what they can at a low cost and buy goods that would be a high cost for them to  make  Adam Smith (Famous economist) wrote The Wealth of Nations 


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